According to a recent much-reported Roper poll, about one in four Americans says it's OK to "cheat" on taxes. Eleven percent said it was OK to cheat "a little here and there," with 5 percent saying people could cheat "as much as possible" — a surge in support for creative tax-filing since the last poll in 1999.
The survey was commissioned by the Internal Revenue Service's Oversight Board, which used the results to justify the IRS's decision to step up enforcement efforts — including the revival of long-dreaded random audits for today's rebellious taxpayers. These much-loathed audits subject taxpayers to detailed inquisitions that columnist David Lazarus of the San Francisco Chronicle described as "line-by-line fiscal colonoscopies."
That the IRS believes it needs to justify its move is no surprise. Just a few years ago, the IRS was raked over senatorial coals in hearings that featured a litany of abuses and outright persecutions of private citizens by tax collectors.
The IRS's own former historian, Shelley Davis, told senators that "[i]n the cloistered environment of the IRS, criticism of the IRS, or the income tax, equals tax protester. Anyone who has the misfortune of bearing that title is most likely going to witness first hand just what 'taxpayer abuse' really means."
In response, Congress passed the IRS Restructuring and Reform Act of 1998, which was supposed to make everything all better.
The post-reform IRS is, we're told, a meek and mild agency that would never repeat the excesses in which it engaged for decades, and so it can certainly be trusted with such an intrusive device as the random audit.
Perhaps so — we'll find out the hard way. But, allegedly housebroken modern tax collectors aside, what's at the heart of the dissatisfaction with the tax system that leads one-quarter of Americans to endorse lying to the IRS?
For starters, some people simply oppose income taxes — or oppose taxation entirely. The late author Robert Heinlein once remarked that "There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him." Albert Einstein chimed in that "[t]he hardest thing to understand in the world is the income tax."
In everyday life, almost any individual or institution that deprives people of their money under threat of force is condemned for theft and subject to harsh penalties. While most people make an unexamined exception for governments, that free pass isn't universal — historically, a significant percentage of the population has seen little difference between tax collection and highway robbery.
In his 1993 history of taxation, "For Good and Evil," author Charles Adams writes on page one that "[p]eople instinctively, in all ages, have called tax men robbers because they operate by threats and intimidations and don't pay for what they take. Consequently, the robbery epithet is not as irrational as it may appear."
Doubts, then, about the morality of taxation have deep historical roots — and such doubts can only be encouraged by a tax code that flummoxed even Albert Einstein.
The challenge posed by America's annual tax season is very real. According to the Tax Foundation's Bill Ahern, "In 1999 individuals and businesses spent over 4.3 billion hours complying with the federal income tax, with an estimated cost of compliance of over $125 billion."
In return for their labors complying with a mind-numbingly complex tax code, Americans have surrendered an ever-growing share of their income to the government. Examining Congressional Budget Office figures, the National Center for Policy Analysis found that "individual income taxes consumed 10.2 percent of GDP in 2000." According to the same report, the tax man's share of Gross Domestic Product has been "rising from 7.8 percent in 1992 to 8.5 percent in 1996 and 9.6 percent in 1999."
With Americans taxed for an ever-growing portion of their paychecks, then taxed again to satisfy the demands of reporting income and filing tax returns, is it really surprising that so many Americans feel few qualms about fibbing to the IRS?
Some people take their objections to the tax system further. For years, a trickle of high-income Americans have emigrated and renounced U.S. citizenship in order to escape the tax system. Congress was sufficiently alarmed that it passed a law in 1996 barring people who renounce their citizenship for tax reasons from returning to the country. The threat has yet to slow the flow of tax refugees, and the New York Times reported in February that corporations are now following suit. Bermuda has become a favorite new home for companies seeking to escape Uncle Sam's appetite.
So respect for the tax system is eroding even as its burden increases. Some Americans would actually rather stop being Americans than shoulder the load.
What to do?
Moderate attempts at reforming the tax system have a long, if unsuccessful, history. But a growing chorus of voices has taken the extra step, demanding that the U.S. scrap the income tax entirely. In a 1998 piece for the Cato Institute, Theodore J. Forstmann and Stephen Moore suggested that "a flat tax or consumption tax is the best way to tame the IRS." Such alternatives would simplify matters for Americans, relieving them of complying with laws and rules that even geniuses can't understand, and eliminating the excuse for intrusive audits and other feared tools of enforcement.
For skeptics who see no need for reforming the tax system to address popular discontent — let alone reducing its take — tax historian Charles Adams offered an important warning. "Angry taxpayers often do not limit their discontent to grumbles — they are prone to react in some direction for relief, using force and violence if necessary. This is, unquestionably, tax history's most important lesson."
There's no doubting that Americans are disgusted with the way they are taxed. The time to reform the system is now.
J.D. Tuccille is a Flagstaff-based Senior Editor of The Henry Hazlitt Foundation's Free-Market.Net (www.free-market.net/).
— Arizona Daily Sun